GWP Rate Increases

Posted by Robin Goldsworthy
on Jul 24th, 2014 and filed under Glendale, News.
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When Glendale Water & Power (GWP) brought Willdan Financial Services of Temecula on board to overhaul its rate structure, the utility was banking on a new system that would plug budget leaks while maintaining a high level of service.

In 2011, when GWP took Willdan’s plans on the road for public outreach, many of the utility’s customers complained over the proposed rate increases, which were set to take place across five years. Others questioned the numbers being pushed. Proponents of the plan, however, countered that it was a necessary move in order for GWP to remain in the black.

GWP’s then Assistant General Manager Peter Kavounas pointed to a looming $11.5 million shortfall in the utility’s budget for fiscal years 2011-12 as a sign of things to come. The need for a new rate plan, he stressed, was “dire.”

But instead of plugging those budget leaks, a shortfall of approximately $9 million was incurred.

Bi-monthly data was used to devise the proposed numbers for monthly rates – a mistake City Manager Scott Ochoa characterized in remarks at the Glendale City Council meeting Tuesday night as “head-slappingly wrong.”

Conversely, fire line users were overcharged because of the skewed numbers devised by Willdan.

“Within a period of a year [city staff] started noticing that revenue was coming in, but not the way we had thought,” Ochoa said. “It became apparent that the rate structure was fundamentally wrong. The quality control in [Willdan] was severely lacking.”

The flaws were so profound that salvaging some of Willdan’s structure was out of the question.

The city has since stated that it would be looking into the possibility of pursuing litigation, which led to last Thursday’s announcement from the city announcing that it was taking Willdan to court.

“It is appalling that Willdan could make such an error and not own up to its responsibility,” said Mayor Zareh Sinanyan in a press release issued last week. “This egregious error by Willdan has put a financial burden on our utility that has a direct impact on our residents.”

Calls to Willdan for comment were not returned.

The city has since contracted a new consultant, Bartle Wells of Berkeley, to create an entirely new rate plan.

“We looked at what our needs were today and what is legally defensible,” said GWP General Manager Steve Zurn of the new plan.

That new plan would increase revenue by a compounded 21.8% over four years. It would also give $9.7 million and $4.7 million boosts for capital improvements and the utility’s cash reserve respectively.

Failure to pass the plan would put a further budgetary strain on GWP, an option that Ochoa said would lead the utility “to sink” within the next four to five years.

“You need to have some kind of rate increase,” he said. “We put ourselves in this boat by not increasing rates … and not having the discipline to reign in capital spending.”

Zurn defended the utility’s pace in discovering Willdan’s mistake, saying that the GWP had put
faith in what it thought was a “very well qualified” firm.

“It took us all [that] time to deconstruct and rebuild [their plan],” he said.

Harry Zavos, who had previously attacked the numbers that Willdan proposed, appeared on the council dais attacking the utility for a number of alleged Proposition 218 violations.

“The city must [raise rates] fairly and within the law,” he said.

“This [plan] is not a popular decision, but it has to be done,” said Councilmember Ara J. Najarian.